Cloud Providers Set Their Sights on the Enterprise

In case you haven’t noticed lately, there’s a war on among cloud providers, and the winner gets the enterprise.

The worldwide market for enterprise-class cloud services is on pace to top $30 billion by 2017, nearly double the estimates for 2012, according to research firm Analysys Mason. Within that timeframe, Infrastructure-as-a-Service (IaaS) is likely to jump from about a third of the total market to 43 percent, while SaaS will drop from its current two-thirds share to just over half. Expect to see more cloud services coming from large communications providers in the coming years as they seek to leverage their core connectivity platforms for higher-order functions.

The low cost of cloud computing vs. internal infrastructure has always been one of its prime selling points, and it seems likely that this downward pressure on rates will continue unabated, to the enterprise’s benefit. Rackspace recently announced a 33 percent price cut for its cloud bandwidth and content delivery network services, which puts them at a mere 12 cents per GB. At the same time, the company issued new Cloud Files storage tiers that fall as low as 7.5 cents per TB per month. This brings Rackspace closer in line with top provider Amazon, which offers the same amount of storage for about 6.5 cents.

Mind you, none of this activity has been lost on more traditional enterprise infrastructure providers. VMware, for one, is said to be increasingly focused on the rise of public cloud services, which is part of the reason the company has embraced OpenStack and other initiatives designed to bridge internal virtual infrastructure with external cloud services. And as more third-party providers tap into programs like vCloud, VMware will have the means to wage proxy wars against top providers like Amazon and Google without having to enter the cloud market itself.

The cloud will most certainly accommodate itself to higher-level enterprise applications sooner rather than later, but how much faith the enterprise will place in third-party infrastructures remains to be seen. The conversion of static, physical architectures to more nimble virtual ones is still in progress, so many enterprises have only begun to realize the true value of the IT plant that has been built over the years at significant cost.

In all likelihood, then, the real battle between the cloud and traditional infrastructure will not be for the well-established, top-tier enterprise, but for the small firms and the start-ups. When there is little legacy infrastructure to preserve, plus enormous pressure to compete with larger rivals without falling prey to hefty up-front costs, the cloud starts to look pretty good.

In fact, rather than guess whether large enterprises will turn to the cloud, the more interesting question is whether today’s smaller cloud-based firms will be able to resist traditional IT as they become larger themselves.